Donation Deadline Looms: Charitable giving may be less rewarding (taxwise) in the coming year

Central New Yorkers are generous by nature. In 2008, the year the big economic recession hit, they donated a whopping $163.2 million to charities and other nonprofits — 3.6 of the typical household’s income, according to a study in the Chronicle of Philanthropy.

As 2012 ends, donors are still contributing to their favorite causes — and can claim their donations as charitable deductions on next year’s federal and state income tax forms. Despite ongoing economic challenges, major donors in particular should dig as deep as they can — because next year, the tax advantages of charitable giving may shrink for them, if they don’t disappear entirely.

With the jobless rate locally and nationally still well above 7 percent, many would-be givers have to prioritize their own bills and family needs before donating to others. The economic downturn that began in 2008 had to be a major factor in keeping the United Way of Central New York from meeting its goal for the past four years. The 2011-12 campaign raised $7.47 million, continuing a downward trend since the $9.06 million raised in 2007-08.

Last month, the Rescue Mission completed its annual fundraising effort, still $150,000 short of its goal of $800,000. Last year, the annual Old Newsboys fundraiser to benefit the Christmas Bureau fell short of its $50,000 goal. Organizers of this year’s drive are optimistic they’ll match last year’s total of $47,800 — or even reach the $50,000 mark.

The Rescue Mission’s Alan Thornton credits Superstorm Sandy with diverting potential contributions from his organizations toward disaster relief. “There was a significant catastrophe, and the community rightfully responded,” he said, adding that the Rescue Mission itself contributed aid to hard-hit areas around New York City.

Thornton said donors also may be holding back due to uncertainty surrounding the so-called “fiscal cliff” looming after the end of the year. The average taxpayer could pay as much as $2,000 more next year, and the end of payroll tax relief will also take a bigger bite out of weekly paychecks. Automatic federal spending cuts could affect everything from public employment to jobless benefits to the delivery of services.

As Congress and the White House dance ever-closer to the cliff, they have discussed options including raising Medicare eligibility from 65 to 67, limiting the higher tax rates to income over $250,000 — or over $1 million — and eliminating or limiting “loopholes and deductions” in the tax code. New Yorkers would be hit hard if the federal deduction for state and local taxes or mortgage interest went away.

Then there’s the charitable deduction. President Barack Obama suggests “capping” all deductions for high-end earners at 28 percent. He estimates this could raise $574 billion over the next decade — and warns that Republicans could eliminate the charitable tax break and others entirely, though House Speaker John Boehner, R-Ohio, denies it.

In a report on the state of the charitable deduction, The Washington Post revealed the distressing fact that nonprofits have spent at least $21 million lobbying Congress to preserve the charitable deduction. That $21 million presumably could have gone to, well, charity. Democracy can work in mysterious ways, all right.

Donors who aren’t in the top tax brackets wouldn’t suffer from high-end limits on deductions. But they would be affected if all charitable deductions ended — for the first time since 1917.

Meanwhile, they can still take advantage of this year’s unlimited charitable deduction rule by contributing to the charities of their choice. But they must do so by the end of Monday.